CAT / FIA FAU Syllabus C. Internal Control - Understanding the Controls - Notes ^{2 / 3}

Understanding it means you can trust that the system gives reliable information

This can be seen in 2 ways

1. It records substance not form

   Internal controls ensure that when a business undertakes a transaction such as a sale, the final recording of the transaction on the accounts system reflects the true substance of the transaction

2. Helping prevent fraud & errors

   All this means is that internal controls help prevent fraud and errors which would make the accounting information incorrect.

In this way internal controls will have a direct effect on Audit Risk